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March 31, 2011

Gartley Pattern Setup Complete?

A Bullish Trend Continuation Gartley Pattern recently completed on E.I. du Pont de Nemours and Company (DD). What does TCG stand for? In The Gartley Trading Method: New Techniques to Profit from the Markets Most Powerful Formation, the Gartley Pattern is categorized into two groups; the Trend Reversal Gartley (TRG) and the Trend Continuation Gartley (TCG.) The difference between the two has to do with the price action that precedes the X point of the pattern. In H.M. Gartley's book Profits in the Stock Market, he identified a significant trend prior to the X point of the pattern.

When the market touches one of the Fibonacci levels closest to our D point projection, we have a valid Gartley Pattern setup. In the above example DD almost touches the 61.8% fibonacci retracement, and then takes off. We would have missed this trade if we only used horizontal retracement lines. However, if we apply the Beck's Emblem to this Gartley Pattern, the TCG setup would have been complete as the tip of the purple quadrilateral was close to one of the angles generated by the Beck's Emblem. The angle generated by the Beck's Emblem gives us a much better buy signal than the 61.8% fibonacci retracement. Why? Angles are always superior to horizontal levels because angles reflect both price AND time dimensions. This can be seen above by using the Beck's Emblem to find Gartley Patterns instead of simple horizontal retracement lines.